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On June 20, 2016, the United States Supreme Court, in a split decision, held that (1) 35 U.S.C. § 314(d) bars challenge to the Patent Office’s decision to institute an Inter Partes Review (IPR) and (2) the Patent Office’s application of the “broadest reasonable construction” standard to interpret patent claims is a reasonable exercise of the rulemaking authority granted by Congress.

Background:

In 2012, Garmin sought an IPR of the claims of a patent held by Cuozzo Speed Technologies, LLC, asserting, in part, that claim 17 was obvious in view of a combination of three prior patents, and the Patent Office instituted review. The Patent Office also instituted review of claims 10 and 14 because it believed that Garmin “implicitly” challenged those additional claims by virtue of claim 17’s dependency. The Patent Trial and Appeal Board ultimately found claims 10, 14, and 17 obvious and denied Cuozzo’s motion to amend the claims.

Cuozzo appealed, asserting that the Patent Office had improperly instituted the IPR with respect to claims 10 and 14, and improperly used the broadest reasonable construction standard rather than the Philips standard. The Federal Circuit rejected both arguments, and Cuozzo appealed to the Supreme Court.

Supreme Court Decision

In a decision by Justice Breyer, the Court affirmed the Federal Circuit on both issues. On the first issue, the Court determined that § 314(d) should be interpreted to bar appeals of the Patent Office’s determinations concerning whether to institute IPRs. The Court looked to the plain language of the statute, which states that the “determination by the [Patent Office] whether to institute an inter partes review under this section shall be final and nonappealable” (emphasis added). The Court concluded that Congress was clear when drafting § 314(d) that institution decisions are not appealable. However, in addressing the dissent by Justices Alito and Sotomayor, the Court left open the possibility of appeal in some situations.

The dissent argued that § 314(d) should preclude only interlocutory appeals and expressed concern that precluding all appeals would prevent any redress for instances in which the Patent Office overstepped its statutory authority. In attempting to address these concerns, the majority stated that the bar created by § 314(d) precludes review of questions tied to the application and interpretation of statutes related to the institution of an IPR. The majority expressly left open the option of review of constitutional questions (e.g., due process) and cases in which the Patent Office acted outside its statutory limits (e.g., cancelling a claim under §112 in an IPR). Thus, the decision places control of determining whether the threshold for institution has been met solely within the purview of the Patent Office, but leaves some flexibility room for larger legal questions.

On the second issue, the Court affirmed the properness of the Patent Office regulation implementing the broadest reasonable construction standard for claim interpretation. In doing so, the Court first addressed arguments concerning whether Congress intended IPRs to be more like a court proceeding or an agency proceeding (such as a reexamination or interference). In reviewing that question, the Court noted that Congress mandated a different burden of proof in IPRs, as compared to district court trials, which implicitly embraced potential inconsistencies in outcomes. The Court also noted that the statute and legislative history did not suggest which claim construction standard Congress intended to be the “proper” standard, but did not find that lack of clarity a problem inasmuch as the statute was clear in its “express delegation of rulemaking authority” to the Patent Office.

The Court found that the application of the broadest reasonable construction standard was a reasonable exercise of the Patent Office’s rulemaking authority, noting that the Patent Office has used the broadest reasonable construction standard for over 100 years in other proceedings, including in similarly structured interference proceedings. The Court also noted that the IPR statute expressly contemplated the consolidation of IPRs with other Patent Office proceedings (e.g., reexaminations), which already use the broadest reasonable construction standard. That consolidation option forced the Patent Office to decide between being inconsistent with its other agency proceedings or with the district courts. The Court stated that it could not find unreasonable the Patent Office’s decision to maintain consistency among its own proceedings.

The Court found unpersuasive Cuozzo’s argument focusing on the low success rate of motions to amend as a basis for precluding the broadest reasonable construction. The Court saw the argument as one aimed at the manner in which the Patent Office exercised its authority – a question the Court did not believe was at issue on appeal.

Ultimately, the Court viewed the application of a particular claim construction standard as the execution of reasonable rulemaking authority to fill “gaps” raised by ambiguity in the statutory language.

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